Inland American selling portfolio in $2.3 billion deal

Inland American Real Estate Trust is selling almost 300 properties in a deal valued at $2.3 billion, part of a strategy to overhaul its portfolio and focus on hotels, shopping centers and student housing.

Inland American, a real estate investment trust (REIT) launched by Oak Brook-based Inland Group Inc., said it has agreed to sell the retail, office and industrial properties to New York-based AR Capital LLC. The deal includes the assumption of about $795 million in debt, and Inland American expects up to about $1 billion in net proceeds, according to a news release.

Inland American, Inland Group's largest REIT, with $10.7 billion in assets, is in the midst of a major repositioning, paring down a diverse collection of properties it acquired mainly before the market crashed. The company is selling off its apartment, office and industrial properties and adding hotels, shopping centers and student housing.

In the deal with AR Capital, Inland American said it is selling 294 net lease properties, assets where the tenant pays some or all of the property expenses. The company said plans to use the proceeds from the sale to buy properties in its targeted sectors and reduce debt. The REIT is also exploring ways to return some of the money to shareholders, possibly by buying back stock.

“The sale of our core net lease portfolio is a major step in executing our long-term strategy of focusing our energies and investment capital in the multi-tenant retail, lodging and student housing asset classes,” Inland American President Thomas McGuinness said in the release. “We believe these asset classes will generate consistent cash flows, which will allow us to continue providing our stockholders with sustainable distributions while allowing us the opportunity to benefit from current real estate trends.”

As of March 31, retail properties accounted for 32 percent of Inland American's portfolio, based on original cost, according to the company's website. Hotels represented 27 percent, followed by office, at 15 percent, industrial, 8 percent, and apartments, 4 percent. Student housing accounted for 3 percent.

In addition to the AR Capital sale, Inland American told shareholders last month that it has agreed to sell its entire 4,919-unit apartment portfolio. It aims to complete the sale in the current quarter, according to a letter to shareholders. The letter did not disclose a price but said that it would exceed Inland's purchase price for the properties. The sale will generate cash proceeds of $200 million, the letter said.

On the acquisition side, Inland American in March paid about $16 million for a 118-bed student housing complex in Dallas. The company that month also paid $53 million for a 159-room Andaz hotel in San Diego.